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ALLY or FCFS: Which Is the Better Value Stock Right Now?

Zacks Equity Research

Investors looking for stocks in the Financial - Consumer Loans sector might want to consider either Ally Financial (ALLY) or First Cash Financial Services (FCFS). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Currently, Ally Financial has a Zacks Rank of #2 (Buy), while First Cash Financial Services has a Zacks Rank of #3 (Hold). This means that ALLY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

ALLY currently has a forward P/E ratio of 7.62, while FCFS has a forward P/E of 19.58. We also note that ALLY has a PEG ratio of 0.61. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. FCFS currently has a PEG ratio of 1.31.

Another notable valuation metric for ALLY is its P/B ratio of 0.87. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, FCFS has a P/B of 2.72.

These are just a few of the metrics contributing to ALLY's Value grade of A and FCFS's Value grade of C.

ALLY stands above FCFS thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ALLY is the superior value option right now.


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Ally Financial Inc. (ALLY) : Free Stock Analysis Report
 
First Cash, Inc. (FCFS) : Free Stock Analysis Report
 
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Zacks Investment Research